What do consumers know and understand about effective interest rates? Evidence from a debt literacy survey in Poland
Ładowanie...
Data
2022
Inny tytuł
Typ
Artykuł recenzyjny
Autorzy
Redaktor
dc.contributor.advisor
Dyscyplina PBN
Ekonomia i finanse
Czasopismo lub seria
Forum Scientiae Oeconomia
ISSN
2300-5947
ISBN
DOI
10.23762/FSO_VOL10_NO1_7
Strona internetowa
Wydawca
Wydawca
Wydanie
10
Numer
1
Strony od-do
117-146
Tytuł monografii
item.page.defence
Tytuł tomu
Opis
Rodzaj licencji
Abstrakt (en)
The key parameter in borrowing is the interest rate. However, research shows that many consumers have very low levels of debt literacy, including knowledge and understanding of ef-fective interest rates. This article uses data obtained from a sample of 1,055 borrowers and a three-question debt liter-acy test to learn which properties of the effective interest rate notion and the calculation thereof are particularly difficult for consumers to comprehend. To this end, logistic regressions were applied which showed that, of the three aspects of the ef-fective interest rate examined, the largest gaps in knowledge and understanding relate to the concept of the time value of money. Unlike the other two aspects, in this case knowledge gaps are more egalitarian – they affect women and men equal-ly and they do not depend significantly on the level of edu-cation. Answers to the time value of money question are also differently related to non-cognitive factors compared to an-swers to the other two questions in the applied debt literacy test. Treating incorrect and “don’t know” responses as separate categories in multinomial regressions confirms these observa-tions, but also suggests that each of these two response catego-ries may convey different informational content